Indemnity Insurance of Improvement Grant Liability Bank conveyancing requirements

Yorkshire Bank Home Loans and Santander, as with many banks, dictate their own requirements when it comes to improvement grant liability indemnity insurance. This page sets out to enlighten conveyancing practitioners on the different lender conveyancing panel where the title to be charged contains improvement grant liability. Lawyers are advised to familiarise themselves with the CML handbook requirements for each lender, for example HSBC, Coventry BS or Natwest. The content on this page is not focused on improvement grant liability indemnity insurance requirements.

Need help with improvement grant liability indemnity insurance from your lender?

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Accord and Chelsea BS like many lenders, obligations require that where improvement grant liability indemnity insurance is effected:

• your firm must supply a duplicate of the improvement grant liability indemnity insurance to the mortgagor and explain to the borrower why the improvement grant liability indemnity insurance policy was effected and that a further policy may be required if there is additional lending against the security of the property
• the improvement grant liability indemnity insurance policy should not incorporate terms that you know would void or compromise the interests of the mortgage company
• the improvement grant liability indemnity insurance policy must be effected without charge to the lender
• the improvement grant liability indemnity insurance policy must be for the benefit of the mortgage company and, if possible, in favour of the mortgagor and any future registered proprietor or mortgage company. Where the borrower will not be covered by the improvement grant liability indemnity insurance policy, the mortgagor must be advised accordingly.
• your practice is duty bound to spell out to the mortgagor that the borrower is obliged to adhere to any conditions of the improvement grant liability indemnity insurance policy and that the borrower should notify the mortgage company of any notice or potential claim in respect of the policy
• your practice must disclose to the insurer all relevant information which you have obtained
• your practice are responsible for approving the terms of the improvement grant liability policy on behalf of the bank
• the minimum level of cover for the policy must satisfy the requirements for the bank (See Part II Handbook requirements )

Regarding the extent of cover for the improvement grant liability indemnity insurance policy (or for that matter any indemnity insurance), consider the following sampling of Section 9.2 of the Part 2 requirements for banks:

Improvement Grant Liability Contingency Insurance : Reflections

The extent of the terms for improvement grant liability indemnity insurance are set out in the policy document. Property lawyers should point your non-lender client to the improvement grant liability indemnity insurance policy itself. The intention of improvement grant liability indemnity insurance is to afford indemnity in respect of the risks set out in the policy schedule - so it is essential check the document to ensure it is correct. The duration of this non-investment insurance contract is in perpetuity unless otherwise stated in the improvement grant liability indemnity insurance policy. It is well worth checking that the time frame is correct.

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Important features and benefits of improvement grant liability Contingency insurance :

Protection via such a policy is to cover the risk of third parties looking to enforce rights that can affect the use of a property. Improvement Grant Liability indemnity insurance Policies are likely to cover the following

• Cover for compensation incurred in any action in respect of the risks specified in the improvement grant liability indemnity insurance, as well as legal and associated costs.
• All sums paid with the written consent of the insurance company to liberate the property from the risks specified in the improvement grant liability insurance.
• The out of pocket expenses of altering or destroying all, or part of the development and the reinstatement of the land, insofar as such alteration, demolition or re-instatement is made necessary by court order.
• Diminution in value due to the successful enforcement of the risks specified in the improvement grant liability policy.
• Expenses for works (including professional fees) for the purpose of the development commenced, before the commencement of proceedings for the enforcement of the risks specified in the improvement grant liability policy, to the extent that such costs are rendered abortive by court decision.
• All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurance company

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Always consider what is not included in the improvement grant liability insurance e.g. does the policy cover any property that has been altered within the 12 months prior to the policy being put on risk? Are legal costs covered?

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Improvement Grant Liability Indemnity Insurance has limitations - Additional considerations

There may be consequences arising from the enforcement of the risks identified in the improvement grant liability policy which are not adequately covered by financial compensation.

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The content set out above covers to properties in England and Wales.